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CS Professional · Banking and Insurance - Laws and Practice · Analysis of Financial Statements of Banks

Under the Third Schedule format, Ganga Bank reports advances in Schedule 9. Advances are classified (a) bills purchased and discounted, cash credits, overdrafts and loans repayable on demand, and term loans; and also by security and by sector. Which of the following is a correct classification basis required in Schedule 9?

Schedule 9 of the Third Schedule classifies advances by nature, by security, and by sector. The security classification is secured by tangible assets, covered by bank or government guarantees, and unsecured, so option A is the correct basis prescribed.

  1. ASecured by tangible assets, covered by bank/government guarantees, and unsecuredCorrect
  2. BShort-term, medium-term and long-term by borrower age
  3. CAdvances to directors, auditors and shareholders separately
  4. DDomestic currency advances and gold-backed advances only

Explanation

Schedule 9 requires advances to be split into three bases: (A) nature (bills, cash credit/overdraft/demand loans, term loans); (B) security (tangible assets, bank/government guarantees, unsecured); and (C) sector (priority, public, banks, others). Options B, C and D are not the prescribed bases.

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